IMPACT OF INVENTORY CONTROL ON ORGANIZATION PERFORMANCE

CHAPTER ONE

INTRODUCTION

In this chapter, the topic impact of inventory control on organizational performance. A study of Innoson Manufacturing Company Limited, Emene Enugu will be discussed under the following sub – heading, background of the study, statement of the problem, objective of the study, research questions, research hypothesis, and significance of the study, scope of the study, limitation of the study, definition of terms, profile of the organizations under study.

1.1 BACKGROUND OF THE STUDY

          From the era of industrial revolution inventory has been known to be one of the most important assets to many companies representing a good percentage of total invested capital, managers have long recognized that good inventory control is crucial. A firm can try to reduce cost by reducing on hand inventory levels. (Abara 2011) on the other hand, argues that customers become dissatisfied when frequent inventory outages called stock-out occur. Thus, companies must make the balance between low and high inventory levels. As you would expect, cost minimization is the major factor in obtaining this dislocate balance.

Raw materials, work –in – progress and finished goods are examples of inventory. Inventory generally refers to the materials in stock. It is also called the idle resources of an organization according to( Stevenson 2009); an inventory is a stock of goods, ( Nahinias 2001) defines inventory as a stock of physical goods held at a specific location at a specific time.

Inventory in the researchers understanding may refers to goods or materials that an organization hold for the purpose of production and sales. Inventory levels of finished goods are direct function of demand oncewe determine the demand for completed clothes for example, it is possible to use this information to determine how much cotton, sewing machines, sewing thread and other raw materials and work-in-progress are needed to produce the finished product.(Abara 2011). Inventory control is among the most important operation management function because inventory requires a huge amount of capital and this affect the delivery of goods to customers, inventory control has an impact on several business function especially in operations, marketing $ finance is concern with the overall financial structures of a firm including funds allocation to inventory. Operations need inventories to ensure smooth and efficient production.

Inventory of different kinds are found in organization like INNOSON company, but there vary a lot in number and nature of the material held. Inventories in such manufacturing firm take many forms such as raw material or components, intermediate work-in-progress, finished goods and distribution inventories centers is and attempt to balance inventory needs and requirement with the need to minimize cost resulting from obtaining and holding inventory ( Helm 2006); refers to inventory control as the supervision of supply, storage and accessibility of items in order to ensure adequate supply and minimize over supply. ( Sinichi Levi et al 2003). The main motive of keeping inventories differ between companies depending on if the inventory is design for a process flow of material

The organizational performance in the content of these work could imply measure of output over input within an organization, which could be in terms of cost reduction, quality enhance and revenue generation. My interest is to know more about inventory control in organizational performance

1.2 STATEMENT OF THE PROBLEM

          It was noted that inventory control in every organization is Important in the achievement of its objectives. The attempt to accomplish the desired goal poses a great threat to the organization.

However, many organizations have been faced with some problem such as low productivity ineffectiveness of inventory control and inefficiency level of organizational output.

That is why this study focuses on how inventory control on organizational performance could lead to increase in organizational performance.

1.3 OBJECTIVES OF THE STUDY

The major objective of the study is to evaluate the impact of inventory control on organizational performance. The study also focuses on the following specific objectives:

i        To evaluate the effect of inventory control on efficiency

ii       To examine the impact of inventory control on productivity

iii      To determine the impact of inventory control on organizational effectiveness